Category Archives: Business

When Mayday Brought Capitalism to the Masses


may 1, 1975

Today is May Day (May 1) 2014.  A search of this holiday that has taken on many meanings will most likely lead to two stories other than the most recent one that brought capitalism to the masses 39 years ago on May 1, 1975.

Story one is May Day’s ancient origin as a pagan festival also known as Beltane, held to celebrate the return of spring in the northern hemisphere, complete with the familiar May Pole, celebrated in many cultures to this day.

More recently, in 19th century America, union and anarchist protests for the 8 hour workday, culminated in violence at a May 1886 union rally outside the McCormack plant at Haymarket Square in Chicago, followed by the trial and executions of several accused. This event led to May Day’s celebration, mostly outside America, as International Workers Day.  In many industrialized countries May 1st is their Labor Day.  Socialists, anarchists and unions especially identify with this version of May Day.

Less familiar but celebrated in financial and investment circles, is the event of May 1, 1975.  This Mayday (most common spelling) was an SEC order  that deregulated fixed commissions on stock purchases that had endured for almost 183 years.  Rather than being driven by small investors, pressure to deregulate had been building through the 1950s and 1960s as large institutions and pension funds began realizing equities held over long periods of time produced superior results to other investments.  They were getting no breaks on larger volume purchases through traditional channels, but were discovering loopholes, and were big enough to bring political pressure for change.  An excellent May 1, 2010 article at tells the story.

Following Mayday 1975, large traders could negotiate hefty discounts.  Discount retail brokerages sprung up to serve ordinary investors, but changes came slowly at first.  I can remember into the early 1980s, selling 135 shares of a low cost stock through a discount firm.  The transaction was handled as two separate trades, one for the 100 share “round lot” trade and another for the 35 share “odd lot” trade, along with separate $35 commissions for each.  Clearly liberation for the small investor had not yet fully arrived, except by sticking to a growing number of no load mutual funds that allowed direct purchase from the fund company without a commission, but Mayday 1975 had set the stage for what was to come.

A year later in 1976 Vanguard introduced the first low cost passively traded index mutual fund based on the S&P 500 index of large capitalized American stocks, intended for the individual investor.  This allowed “buying the market” and avoiding the expenses of trading in usually unsuccessful (because of the cost) attempts to outperform it.  Anyone could now guarantee capturing the generous returns equities have been shown to make available when held over long periods of time, less very low management expenses.  Success led to more index funds covering other segments of the market being made available.

Today any number of shares can be bought or sold for one low commission under $10 through a variety of online trading companies, without ever talking to a human.  This was made possible as online trading took off in the late 1990s and intense competition and efficiencies and availability of the internet came to benefit the consumer as never before.

Diversification across any number of asset classes is today easily achieved through very low expense ratio exchange traded index funds, avoiding the risk associated with individual stocks or expenses of trading.  Participation in the fruits of capitalism has never been cheaper or more accessible for virtually anyone.

Those who complain of big profits of large corporations only need to step up, themselves becoming owners, at very low expense, to join in the process of voluntary shared ownership that is capitalism, making the fruits of its success finally available to both them and the masses.  That truly is something to celebrate.  Happy Mayday (1975 version) to all!

Note: This article shared to WatchdogWire-Pennsylvania




How the US Postal Service Could Possibly Save Itself

Just last week the United States Postal Service announced another $1.9 billion loss in just one quarter, with the warning that without substantial changes the losses would continue to mount.  Something has to give.

Retired from the Postal Service, I have some ideas on what needs to be done to save this Constitutionally provided institution, and a new line of clothing, mentioned several months ago, does not even make my list, nor do I think elimination of Saturday delivery alone would be sufficient.   During my career I carried mail, worked inside a large postal plant, and collected data for a year.

It was that year of collecting data that foretold today’s inevitable crisis.  The year was 2000, and at that time as I remember, first class mail was less than half the letter mail volume but more than half total postal revenue.  The problem was that, of that first class mail, somewhere around 70% consisted of bill presentment and payment.  The writing was on the wall.  Much less bill presentment, bill payment volume has evaporated to the internet and will continue even more.  This was one major straw that broke the back of a camel already straining under what the postal service failed to recognize early on, that the business was becoming about the delivery of things rather than information.  Other substantial problems contributed to the current situation, but the loss of quality volume sufficient to sustain delivery to every delivery point six days a week was an inevitable result of new information technology and beyond the post office’s control.  Simply cutting the workforce and utilizing a heavy application of sorting automation, in many ways commendable, could not keep up with the deteriorating situation.

Political considerations put cutting several known sources of waste beyond reach that could have delayed, but only delayed, the current crisis.  One example, but certainly not isolated, happened near where I live.  Two small towns that appear as one are separated only by a railroad track.  Each had its own post office with its own postmaster and staff, and unfortunately still does.  One town outgrew its office.  Since the two towns together are smaller than many single towns, the opportunity was perfect to build one new office large enough to accommodate both.  I’m not sure if this was even suggested, but am confident, if tried, the local congressman would have been besieged with calls from one of these adjacent towns about losing its identity or the hardship of having to travel perhaps a half mile further to reach the new combined office.

Another common well-known waste that politics preserves occurs in suburban neighborhoods that originally had mail delivered to a box attached to the house or through a slot in the front door, rather than a box at the curb.  In such situations the carrier drives to the area, parks and walks to each house, then moves the vehicle to the next area, over and over.  Yet by all appearance such neighborhoods are identical to others where curbside boxes were required from the start, and delivery from the vehicle is several times more efficient.  Private businesses looking at the current postal challenges would quickly change this, but under the political connection no one dares to even try.

Unions are another obstacle to efficient operation in ways other than wages that exceed the skill level.  Removal for poor performance or abuse of leave is extremely  difficult.  The workplace is fractured into crafts, each represented by its own union, so employees of one craft may not touch the equally low skilled work of another.  At one time this could work, simply not today.  One would think when workers at some plants, willing to work many hours of available overtime, can earn in excess of six figures, there would be concessions to overall efficiency and responsibility to secure the remaining jobs of all.

That brings us to today with the postal service looking to cut Saturday delivery to keep itself afloat.  This is attempting to put a band-aid on a gaping wound, and will be difficult to manage as well, as every Monday will follow two non delivery days and will be like the current volume anomaly of Tuesdays after Monday holidays.  Of course there will still be Monday holidays and those Tuesdays will now be after three consecutive non delivery days, what I can only imagine as a volume-overload management nightmare.

With that we get to the only possible solution I can conceive, the immediate move to three-day M-W-F delivery.  While each delivery day volume would increase, it would be more manageable by being more consistent day-to-day.  Such a move would mean adding carriers as some routes would have to be cut slightly (but not nearly by half) to get the job done.  Savings would be attained by cutting the use of delivery vehicles substantially.  The other significant savings would require a major change of workplace rules where carriers not delivering express mail and priority parcels on Tu-Th-Sa would be working in plant preparing mail for delivery, replacing work being done by clerks and mail handlers now, eliminating many of those positions.  Consideration would have to be made to occasionally deliver on Tu-Th-Sa in working around holidays.

Proposed plans are to continue delivering parcels six days a week and I would assume express mail also.  Most offices could do this job with one of every three or four current carriers, leaving the others to work in plant.  Limiting six-day parcel delivery to priority rate parcels would encourage greater use of the higher priority rate.  For letters considered urgent there already is a flat rate express letter option that does not require a time-consuming signature.  Out of the box thinking and a willingness to be flexible with current workplace rules and a decidedly more radical approach is necessary to potentially continue the US Postal Service as a self-sustaining entity in the twenty-first century.

Note: This post shared to WatchdogWire-Pennsylvania